Primary-Market Auctions for Event Tickets: Eliminating the Rents of 'Bob the Broker'?

59 Pages Posted: 11 Sep 2017 Last revised: 14 Jun 2023

See all articles by Aditya Bhave

Aditya Bhave

University of Chicago

Eric B. Budish

University of Chicago - Booth School of Business

Date Written: September 2017

Abstract

Economists have long been puzzled by event-ticket underpricing: underpricing both reduces revenue and encourages socially wasteful rent-seeking by ticket brokers. This paper studies the introduction of auctions into this market by Ticketmaster. We first show theoretically that Ticketmaster’s auction design, a novel variant of position auctions, has attractive efficiency, revenue and no-arbitrage properties. Then, by combining primary-market auction data from Ticketmaster with secondary-market resale value data from eBay, we show that the auctions “worked” in practice: on average, they eliminated the arbitrage profits associated with underpriced tickets. We conclude by discussing why, nevertheless, the auctions have failed to take off.“It is nevertheless true that gangs of hardened ticket speculators exist and carry on their atrocious trade with perfect shamelessness.” —New York Times Editorial (1876).

Suggested Citation

Bhave, Aditya and Budish, Eric B., Primary-Market Auctions for Event Tickets: Eliminating the Rents of 'Bob the Broker'? (September 2017). NBER Working Paper No. w23770, Available at SSRN: https://ssrn.com/abstract=3035124

Aditya Bhave (Contact Author)

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Eric B. Budish

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8453 (Phone)

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